Tax Decoded | Winter 2017
Illinois Independent Tax Tribunal: An Interim Report
Insights into the agency’s operations and transparency.
Keith Staats, JD
Executive Director, Illinois Chamber Tax Institute
Deciphering Today's State & Federal Tax Law
In early 2014, the Illinois Independent Tax Tribunal was established as an independent
state agency to resolve disputes between taxpayers and the Illinois Department of Revenue
(IDOR). The Tribunal was created with the somewhat grudging acquiescence of IDOR’s
administration. Before the Tribunal was established, protests of tax assessments were heard
by IDOR administrative law judges who drafted decisions for final approval by IDOR’s
director of revenue. The director of revenue had the authority to modify and reverse the
judges’ decisions. It’s easy to see how this structure could be perceived to lack objectivity
— hence the establishment of the Tribunal.
Today, the Tribunal’s jurisdiction extends to taxpayer protests of notices of deficiency
(income tax), notices of tax liability (sales and excise taxes), denials of refund claims, and
protests of penalties (including personal liability penalties). However, the Tribunal’s
jurisdiction is limited to matters in which more than $15,000 is at issue. Another caveat
is that the Illinois Supreme Court ruled many years ago that defending taxpayers in
administrative matters constitutes the practice of law, meaning only licensed attorneys
may file protests and represent taxpayers before the Tribunal.
In addition to cases below the $15,000 threshold, certain matters weren’t transferred to
the Tribunal and continue to be heard by IDOR’s administrative hearings division. The
most notable of these are protests of denials of charitable sales tax exemptions and
charitable property tax exemptions.
Now that the Tribunal has been hearing cases for almost four years, I thought it was time
to review its work and gain some insights into the caseload and outcomes. To provide
transparency, Tribunal taxpayer protests and the resulting docket filings are publicly
available for review (unlike those of IDOR’s administrative hearings division).
In 2014, the first year of the Tribunal’s operation, 256 cases were filed. In 2015, 270 cases
were filed. In 2016, 238 cases were filed. And through late October 2017, 147 cases were
filed. The number of cases filed with the Tribunal each year appears steady, and I’m hesitant
to surmise that the lower number in 2017 is any indication that taxpayers are growing less
likely to file protests with the Tribunal. It’s more likely that the initial influx was due to taxpayers
transferring cases to the Tribunal because they received no substantive action in
IDOR’s administrative hearings division. In the Tribunal’s earlier years, IDOR also issued
several assessments related to a focused audit review of gas stations and other cash
businesses. Finally, IDOR has reported its audit division has lost a significant number of
senior staff to retirement, which could be slowing down audits and the issuance of
By law, the Tribunal must publish its final decisions. Unsurprisingly, the Tribunal didn’t
issue any decisions in its first year of operations. Final written decisions are only issued at
the conclusion of contested cases, and in my experience, it generally takes well over a
year to reach a final ruling. The Tribunal issued six decisions in 2015, two decisions in
2016, and six decisions so far in 2017.
These numbers may lead you to believe that the Tribunal isn’t deciding much, but my
review of cases from 2014 shows that all but around 16 of the cases have been resolved.
Of the 2015 and 2016 cases, 75 and 108 cases remain open.
Many of the cases were even dismissed at
IDOR’s request. IDOR withdrew its refund
claim denial in 16 instances in 2014, three
instances in 2015, and two instances in
2016. IDOR withdrew its assessment in
eight cases in 2014, 14 cases in 2015, and
12 cases in 2016. IDOR withdrew the personal
liability penalty assessment notice
that triggered the protest in 18 cases in
2014, 37 cases in 2015, and 22 cases in
2016. Taxpayers withdrew 28 protests in
2014, 19 in 2015, and 13 in 2016. The Tribunal
further dismissed protests for various
reasons related to a lack of jurisdiction or
defective filing. In 2014, 17 cases were
dismissed for these reasons, and eight in
both years 2015 and 2016. A number of
cases were stayed each year pending resolution
of a related matter in the courts —
five in 2014, 10 in 2015 and 11 in 2016.
What’s also interesting is that 133 of the
256 cases filed in 2014 were disposed of
by settlement, as well as 98 in 2015 and
63 in 2016 — it appears that IDOR is quite
amenable to settling cases before the
Tribunal. What we don’t know are the
terms of the settlements. My guess, however,
is that IDOR is inclined to settle cases
rather than risk adverse decisions. This
would account for the fact that the
reported Tribunal decisions appear to
be skewed favorably towards IDOR.
Speaking from personal experience as a
former general counsel of IDOR, it was my
general practice to carefully evaluate the
risk of establishing adverse judicial
precedent when reviewing proposed
settlements. I suspect the current IDOR
administration may be doing the same.
At this point, it’s still too soon to evaluate
the ultimate success of the Tribunal. I do
think that the number of cases resolved
through settlement makes a case to support
a more robust settlement process
within IDOR. It’s also worth noting that a
more robust settlement process would
allow taxpayers to more fully utilize their
CPAs in the process.
With IDOR’s support, the Illinois Chamber
of Commerce has led efforts to modify the
law to move protests of sales and property
tax exemption determinations to the Tribunal
and remove the $15,000 threshold.
They will continue these efforts next year.
For now, I recommend only incremental
changes to the Tax Tribunal. From my
review of the docket, it appears that cases
could be resolved quicker if additional
resources are provided to IDOR and the
Tribunal. It appears that additional IDOR
litigators may be necessary given the pace
of the filing of IDOR answers to petitions.
I think we need to continue to observe
how it works over the next few years
before suggesting any radical changes.